Speeding up Digital+'s sale

After weeks of contacts with possible buyers for Sogecable’s Digital+ platform, majority owner Prisa and its financial advisor HSBC have extended the field of companies being told of Sogecable's interest in running away from the pay-TV business.
Among those companies are Italy’s Mediaset, already a reference shareholder of Spanish private national channel Telecinco; News Corporation; and Canal+ France's owner Vivendi. Spain's main telco Telefónica is another possible candidate. But no order to sell by Prisa has been given yet.

After Telefónica's decision to quit Sogecable's capital last December, Sogecable's debt will go up to to €5 billion. At the end of last fiscal year Sogecable's debt was E3 billion. Now the audiovisual company's debt represents six and a half times its EBITDA which was €780 million last year.

But the downturn in the audiovisual market and the financial crisis is likely to push down Prisa's valuation of €3.5 billion for Sogecable. This will mean an eventual Digital+ buyer will have to assume the platform’s debt of €880 million. Moreover, any buyer will have to compensate Prisa for the €600 million of Sogecable's fiscal credit which it will lose if it sells its shares which generated it.

At present there are three possible solutions to Digital+'s sale. The first would mean an agreement with Telefónica which has its own IPTV offering, Imagenio. Under this scenario, Sogecable would be in charge of content management and Telefónica would manage the client base.

Many see this as the best alternative for Sogecable so its managers have already initiated contact with Telefónica according to market sources.

On its side Telefónica is thought not to want Digital+'s two million subscribers to end up in the hands of a foreign company such as France Télécom or Vodafone whose goal is to continue growing in the Spanish telecommunications market.

The second possibility is splitting Digital+ and its sale to an international industrial group. Here BSkyB and Vivendi appear to be the best candidates although Sogecable has also made contacts with Mexican mogul Carlos Slim. But Carlos Slim has denied those contacts.

The last possibility is to give the green light to a financial partner in Sogecable. Here Goldman Sachs could be a candidate but Sogecable apparently does not like this solution.

Sogecable needs a speedy sale as Digital+’ value is going down because its subscriber cancelation rate stands at around 12% and its growth is almost at a standstill. This lack of dynamism has caused a downturn in its income per subscriber at the same time as a downturn in its advertising revenues.