Deals revamp Spain's television landscape

La Sexta, Antena 3 in advanced merger talks

MADRID -- Twin deals designed to restructure Spain's television landscape marked Thursday as private channel Antena 3 told stock authorities it was in advanced talks to merge its interests with rival broadcaster La Sexta, while keeping their channels separate, on the same day rival private network Telecinco said it was negotiating a similar deal with Cuatro.

Rumors of negotiations have been flying for months as Spain's biggest media companies seek to bolster plummeting advertising revenue in the face of an increasingly crowded TV landscape and in advance of the analog blackout scheduled for April 10. But on Thursday, both Antena 3 and Telecinco submitted official notification to Spanish stock authorities of their respective talks.

Antena 3, valued at €1.6 billion in market capitalization, and unlisted La Sexta would look more attractive to advertisers with their combined 22% audience share. They would also form a massive media holding that weaves together giants like Planeta, De Agostini, Mediapro and Televisa.

The deal -- which would see Antena 3 take an 80% stake according to Spanish business daily Expansion -- is expected to take place in the coming weeks via a share swap. Insiders suggest it would be a purely financial agreement, not affecting the separate channels.

"Each channel would maintain its own identity, brand and programming," said one insider, who asked not to be identified. "The audience would not notice a change at all."

Most industry insiders were scratching their heads at how the right-leaning Antena 3 would mix with the leftist La Sexta, despite the plans to maintain separate editorial lines.

"When you need an agreement, it creates strange bedfellows," said professor Jorge Gonzalez, a communication specialist at IESE Business School. "Any way you look at it, it's a strange animal."

Three-year-old La Sexta, with its relatively small infrastructure of some 100 employees, comes to the agreement with coveted professional soccer and Formula One rights. But stalwart Antena 3 has the lion's share of audience, content and advertisers.

Spanish broadcasters financial woes caused by the tight advertising market have been exacerbated by a blossoming TDT sector, which is adding channels. By combining their interests, the two sides look to appeal to advertisers.

Meanwhile, Spain's biggest media group Prisa is in advanced talks to sell its broadcaster Cuatro and a 20% stake of its satellite platform Digital Plus to Telecinco, which is controlled by Mediaset.

Prisa had been looking to sell its satcaster to pay off its €5 billion debt and restructure its media business, emphasizing its free-to-air channel Cuatro. Last month it sold a 21% stake in Digital Plus to Spanish telecom Telefonica for some $707.5 million.

"Antena 3's news and Prisa's news is very different," said one analyst. "Prisa needs the money. But the bottom line is that they are all looking to help their advertising dollars by going to advertisers with a broader offer of audience share."

Spain's most profitable channel, Telecinco posted €432 million in revenue in the first nine months of 2009, with €63 million in profit, while Cuatro showed €31 million in operative losses.

Telecinco and Cuatro combined would represent some 25.2% of the audience.

Stock prices for Antena 3, Prisa and Antena 3 jumped Thursday, following the news.