Regulators See Red Flag on Telefonica's Canal Plus Deal

The deal would make the Spanish telecom the country's biggest pay-TV operator and negatively affect competition

The European Commission (EC) has expressed concerns about the Telefonica-Canal Plus operation to set up a single-pay TV company, which would be 100-percent controlled by the Spanish telcom giant.

In a document sent to Spanish regulator CNMC, Brussels claims that the operation is likely to adversely affect competition in the pay TV market, as Telefonica would then control over 80 percent of it. The EC said the four markets that would be affected by the operation would be pay TV, TV rights (particularly sport events and cinema), TV distribution and sales of added-value telcom services.

The EC’s red flag is a non-binding suggestion for the Spanish competition watchdog CNMC, which will be responsible for the final decision. Recently, the CNMC launched an in-depth antitrust investigation into Telefonica’s acquisition of Canal Plus, also amidst signs of lack of competition in the market on the grounds that the deal "could significantly hinder competition in the markets related to pay TV, audiovisual content and electronic communications services."

In May, Telefonica became Spain’s leading pay TV operator overnight when media group Prisa agreed to sell its 56 percent of DTS, known as Canal Plus in Spain, to Telefonica, which already owned a 22-percent stake.