Spanish TVs urge to merge

Michael Hedges April 7, 2009

Recession hit media executives are hearing from their bankers, regulators and even family members. The big question: ‘What are you going to do and when?’ Everybody, it seems, wants to rearrange the landscape.

Television operator Telecinco is as hard hit as any broadcaster in Spain. Revenues are under pressure. Competition is strong, ruthless and set to increase as Spain tries to embrace digital television. Said CEO Paolo Vasile, “survival is becoming increasingly complicated.”

Last week Telecinco chairman Alejandro Echevarria said (April 2) the company is studying possible mergers. A day later the company had to explain itself to stock market regulator CNMV downplaying suggestions it was in serious negotiations with local television operators. Jose Miguel Contreras, CEO of smaller but growing La Sexta, said he’s already in informal talks.

The Spanish Parliament gave the green light to broader mergers and acquisitions in the media sector. Broadcasters can now hold up to 27% stakes in other broadcasters, up from 5%.

Grupo Planeta and Antena 3 quickly said they had no plans to buy or be bought. La Sexta’s Contreras, on the other hand, said he was ready to listen.

Telecinco and Antena 3 are Spain’s most successful commercial broadcasters. But being big hasn’t kept the recession wolf from the door. Television ad spending is expected to be off 25% in the first quarter this year. The biggest are always worst hurt.

And, too, Spain’s public broadcaster RTVE  - itself once at deaths door – has rebuilt respectable audience shares. Basic audience figures for March released this week (April 6) shows TVE1 at a 17% full day market share, Antena 3 at 15.2% and Telecinco at 15%, changing hardly at all from February. Cuatro and La Sexta posted 9% and 6.7% respectively. Digital TV viewing rose slightly to 8%.

As RTVE gains audience shares, commercial broadcasters have renewed demands for the Spanish government to limit advertising on public TV. “We demand immediate government action on this matter,” said Telecinco’s Echevarria. So far, the Spanish government has shown little interest in changing the public broadcasters’ funding model after radically changing its governance two years ago and bailing out a huge debt. RTVE now offers seven television channels and is considered quite competitive (read: improved).

Outright mergers are thought problematic by Spanish media watchers. Mediaset, the majority owner, is unlikely to approve diluting its stake in Telecinco. Anyway, mergers and acquisitions need bankers with liquid capital. Some Spanish media watchers expect Telecinco and Antena 3 to hook up… somehow, sometime.  Groupo Antena 3 also owns radio network Onda Cero. RTL is a significant shareholder.

TV channel Cuatro is owned by Spain’s biggest media company Prisa Group, which owns Spain’s big newspaper El Pais and biggest radio network Cadena SER. Mexico’s Grupo Televisa owns 40% of La Sexta.

Plumeting ad revenues are not the only plague visiting Spanish media houses. In one short year (April 3 2010) analogue television will be fully shutoff. The first phase strikes Spanish households in less than 90 days, affecting about five million viewers. About half Spanish households are equipped for digital television, said Impels TDT president Eladio Gutiérrez at a Madrid press conference (April 3). Impels TDT is the Spanish digital television support group.

Currently channel offerings on digital multiplexes are limited because the number of digital multiplexes are limited. Gutiérrez called for a “road map” to a solution but “the process is on track.” Television operators are pining for their own multiplexes, preferring control to sharing. And, too, most Spanish television operators, stung by evaporating ad revenues, are looking to pay TV business models.

The digital “road map” could be leading off a steep cliff. This week (April 7) Prisa Group’s principal bankers HSBC and BNP Parabas asked for a bit of clarity about restructuring and divesting after a €1.95 billion credit extension. Prisa Group owns the digital multiplex Digital+, which is top on the divesting list.