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European Commission Paves Way For Merger

By | August 28, 2002

      The merger between Spanish satellite pay-TV platforms Via Digital and Sogecable moved a step nearer completion after the European Commission announced earlier this month that it was up to the Spanish authorities to rule on the merger.

      Jesus Gomez, a media equity analyst at Banco Santander, told Interspace: “From a stock market perspective, investors were fearing that the merger would not be approved if [EC Commissioner] Mario Monti was the one who decided on it.”

      Yet, despite this news, it seems likely that there will be conditions placed on the merger, which could still derail it. Gomez said: “I think there is no chance that the merger will go through without a problem. I am sure [the Spanish authorities] will be imposing some conditions. I think they will be very similar to those set in Italy. So, [this would involve] limiting the number of years for the [programming] content contracts with the Hollywood studios, football teams, opening the platforms to new providers of content, etc.”

      The main obstacle could be the Spanish government’s concern over Grupo Prisa, the force behind Sogecable, and the influence it could have in the Spanish media industry. Gomez commented: “The main reason being Prisa is the controlling shareholder of Sogecable. Prisa is linked to the Socialist Party and the ruling government is Conservative. So, a Conservative government is unlikely to give anything to Prisa. Therefore, we can imagine the conditions that the Spanish government are going to set for this merger to go through are going to be quite demanding.”

      The merger would create a platform with over 2.5 million subscribers. Even with the differing political interests involved, it seems unlikely that the deal would be killed. When the deal was announced in May, there was a widespread belief that it had tacit approval of the Spanish government and that the conditions were worked out in advance.

      The restrictions, if similar to those seen in Italy, would likely be workable for all parties. One equity analyst who requested anonymity commented to Interspace: “I don’t think Sogecable will walk away from the deal. I think that both companies, Sogecable and Via Digital, are extremely weak. Consequently, I think will need to go ahead. I think you will have similar restrictions to those you have in Italy. Indeed, the chairman of Grupo Prisa said a week after they announced the merger, that if the government did not approve the merger, then both companies would go into bankruptcy.”

      The deal could also pave the way for further consolidation in Europe’s pay TV markets.

      With News Corp potentially on the verge of acquiring Telepiu in Italy from Vivendi Universal, there could potentially be major consolidation in two of Europe’s major markets before the end of the year. The spotlight would then shift to France to see whether the two satellite platforms, Canal Satelite and TPS, would merge their operations. The likelihood of this is likely to increase now that the EC has decided not to get involved in Spain.

      –Mark Holmes

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