Telefonica Takes 11 Percent Stake in Mediaset's Italian Pay TV Arm

4:49 AM PST 07/07/2014 by Pamela Rolfe

The announcement comes in a week of frenzied activity that shows European telecoms looking to bundle services.

MADRID — Spanish telecommunications giant Telefonica continued its European spending spree on pay TV platforms on Monday, announcing it has agreed to invest €100 million ($136 million) into Mediaset's Italian pay TV business, Mediaset Premium, in exchange for an 11.11 percent stake in the unit.

The agreement gets an external player in on the loss-making pay TV business, which Mediaset said it hopes to open further to other players. Possible investors could include Al Jazeera and Vivendi, according to some sources.

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The price paid puts an enterprise value on the unit of €800 million, Telefonica said in a statement to Spanish stock authorities.

Spanish telecom Telefonica said Friday it agreed to buy full ownership of pay TV company Canal Plus Spain by acquiring Mediaset's 22 percent stake.

The move comes just days after Telefonica took full control of Spain's pay TV operator Canal Plus Spain, which it had been angling for for the better part of a year — upping its 22 percent stake in the company formally known as Distruidora de Television (DTS).

Mediaset Spain announced the sale would mean €325 million ($442 million) for the Spanish broadcaster, in addition to up to €30 million ($40.8 million) over the next four years for new pay TV subscribers.

The Spanish telecom announced an expansion strategy earlier this year via its Movistar Fusion TV with an eye on bundling services. The strategy has included bulking up its presence in the pay TV market, buttressed by key sports rights such as Formula 1, European Cup 2016, the World Cup 2018 and UEFA rights for the next four years.

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Telefonica's main rival in Spain, Vodafone, just received EU approval to acquire cable operator ONO late last week.

Mediaset stock was trading up 1.62 percent at €3.76 ($5.11) midmorning after the announcement.

"The Mediaset share price has been volatile given uncertainty on Serie A and on Spanish pay TV [both now resolved] and potential for a deal on Italian pay TV [underway]. And although uncertainty remains on advertising, we are positive on the outlook and reiterate our 'buy' recommendation [on the stock]," said UBS analyst Tamsin Garrity.

Georg Szalai in London contributed to this report.

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