Market Insight

Mediaset confirms it wants to merge Italian and Spanish pay TV interests

March 25, 2014

Tim Westcott Tim Westcott Director, Research and Analysis, Programming

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Mediaset has confirmed that it is investigating the possibility of combining its Italian pay TV operation Mediaset Premium with Spanish operator Canal Plus. However, the Italian media company said it would have to wait until the Spanish platform's main shareholder Prisa makes a decision on whether to sell its 56% share. 

Prisa has been looking to sell its shares in Canal Plus for more than a year, with Telefonica and Mediaset Espana, which each hold a 22% stake in operating company Distribudora de Television Digital, first in line to increase their interest. Telefonica has reportedly made two offers to acquire Prisa's stake, both of which have been rejected as too low.

Reporting full year 2013 results this afternoon, Mediaset management confirmed that the creation of a single pay TV company operating in Italy and Spain is its preferred option. The move would create synergies in technology, the development of on demand services, and rights acquisition. An evaulation of a merger plan is, they said, being considered by the respective boards.

The sale of all of part of its digital terrestrial service Mediaset Premium in Italy is, they said, not currently being considered.

Mediaset reported €552 million in pay TV revenues last year, up 7% on the year before. The company does not disclose subscriber numbers for Mediaset Premium, but said that ARPU was around €25 a month. Management said its challenge would be to keep revenue on the same growth trend in 2014. However, next season Mediaset will no longer be able to air matches from the Champions League as rights holder Sky Italia has decided not to sub-license digital terrestrial rights. 

Mediaset has, however, acquired exclusive rights to the Champions League for three seasons from 2015/18. The company also said that the auction for rights to Italian football - Serie A - from 2015/16 is imminent but said that it was not planning to increase its spending on the league. In its view, Serie A has become less valuable since the last contract round.

Total net revenues for Mediaset were €2.589 billion last year, down 9.5% on 2012, though EBITDA was boosted by a cost-cutting programme to come in at €1.043 billion, up 5%. Mediaset's core advertising business was severely impacted by a fragile Italian economy. with net advertising revenues falling 11% to €1.760 billion. Ad revenues in the first quarter were flat. 

Our take

Prisa is keen to reduce its debt burden by selling its interest in DTS, but has not been able to find anyone prepared to offer the €800 million it is looking for. Telefonica reported offered €600 million but was rejected, opening the way to Mediaset's merger proposal. For the Italian company, a deal has a potential upside in both countries: a bigger share of a market-leading pay TV business, and fresh investment in Mediaset Premium. 

The company has been looking for a strategic partner for the business since last year. Mediaset Premium has struggled to grow in a market where the satellite platform Sky Italia is well in the lead and is stuck in second place with gradually escalating content costs threatening to spoil the company's aggressive pursuit of maintaining profitability. However, there is an obvious lack of symmetry between Mediaset's 22% stake in DTS and its 100% of Mediaset Premium and it is questionable whether Telefonica would be interested in buying into the Italian platform. The telco has, however, displayed an interest in increasing its content investments, launch a film and TV studio and a pay TV sport channel in Spain.


Italy Spain
Mediaset Prisa Telefonica
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