Who will buy Spainís Digital+?

One headline says BSkyB is looking to make a bid for Group Prisaís Digital+ pay TV operation. Another vaguely talks about News Corp making a bid so that the Spanish broadcaster would sit nicely alongside its growing investment in German pay-TV player Premiere. So where might the James Murdoch-helmed News Corp Europe sit in all this?
Some eight years ago BSkyB put £1bn on the table to partner Leo Kirchís then-owned Premiere World, and lost the lot when Kirch Group went belly-up. The loss still smarts, and has forced a cautious attitude at BSkyB in regard to Continental expansion. BSkyB is also facing something of a cash problem over its purchase of 17.9% slice of ITV Ė and representing a significant paper loss of the best part of £1bn. As at March 31, Sky had a net debt of £1.9bn, and had generated more than £600m in cash from the first 9 months trading (BSkyB has a June 30 year-end).

However, and despite burning its fingers badly in two significant investments, it could still borrow the estimated £3bn it would cost to pick up Digital+. And £3bn might be seen as ďcheap at the priceĒ given the opportunities and local enthusiasm for pay-TV. But (and there has to be a but), Sky will almost certainly not be alone in its bid for Digital+. Franceís Vivendi, which helped create the original pay-TV business in Spain, might well be a bidder, as could Telefonica and local cable giant ONO.

And while BSkyB might make the move as a solus play it has to be remembered that News Corp controls only 39% of Sky. Elsewhere in Europe it is a 100% News Corp Europe (NCE) thatís making plenty of noise. It owns 100% of Sky Italia, and now owns 19.9% of Germanyís Premiere, with the EU having just removed any potential restrictions on it increasing its stake in Premiere. James Murdoch (pictured, above) has created a team around him that suggests NCE is going to be a real player in its own name, raising its own cash and fundamentally making its own commercial decisions.

Besides, what News Corp has cleverly done is to use BSkyB as its technology test-bed, and then rolling out the experience to its wholly-owned properties. Given that it is News Corp which is making the running in Germany, is it likely to leave the smaller Spanish operation to Sky?

Weíll see, but NCE is undoubtedly going to get bigger. BSkyB is already reportedly anxious that it might miss its 10m core DTH subscribers target (by 2010). This might encourage it to venture outside the British Isles for the first time since 2000.

HDTV is proving to be a very nice business to be in, with sports-mad Spanish just as likely to embrace high-def as sports-mad Italians and sports-mad Brits. In other words thereís plenty of life still in pay-TV. Either way Messrs Murdoch have some attractive challenges ahead.