Spain’s Ad Market Faces Prolonged Slump, Prisa Predicts

Promotora de Informaciones SA, publisher of the newspaper El Pais, dropped to the lowest level in six weeks in Madrid after saying Spain’s advertising market will shrink more amid low consumption and high unemployment.

Prisa, as the company is known, fell 2.6 percent to 37.5 euro cents, the lowest price since Aug. 15. That valued the Madrid-based company at 398 million euros ($513 million).

“There’s no visibility at all in the advertising market,” Chairman Juan Luis Cebrian said in an interview this week. “Online ad revenues are climbing a lot, more than 20 percent, but that’s yet not enough to compensate the overall decline.”

Shares of Prisa have fallen 57 percent this year and are headed for their third consecutive annual decline as newspapers grapple with the loss of readers and advertisers. Spanish Prime Minister Mariano Rajoy’s government announced yesterday its fifth austerity package in what may be a move to head off tougher conditions demanded as part of a potential European bailout.

The advertising market in Spain has dropped by about 15 to 20 percent this year and estimates for the fourth quarter indicate it will continue to fall, said Eduardo Madinaveitia, a director for media research at Zenith Media in Madrid.

‘Bleak’ Outlook

“The outlook is really bleak,” Madinaveitia said. “As Spain continues to suffer from spending cuts and tax increases, consumption will suffer and advertisers won’t be willing to boost investments.”

Spain’s biggest media company will rely on its textbook- publishing unit Santillana and the pay-TV business, along with its exposure to Latin America, to buffer the impact from lower ad sales, Cebrian, 67, said.

Advertising sales from Spain and Portugal fell 16 percent in the first six months to 221 million euros, accounting for 78 percent of Prisa’s total ad revenue. Advertising made up 22 percent of Prisa’s operating revenue in the period.

In July, Prisa’s board named Cebrian executive chairman. Ignacio Polanco, whose late father Jesus de Polanco built Prisa around El Pais, became honorary chairman. Fernando Abril- Martorell was named chief executive officer.

In November, Mexican billionaire Carlos Slim bought a 3.2 percent stake in Prisa, expanding his media holdings that also included a stake in New York Times Co. (NYT)

Digital Plus

While the debt crisis is also hurting Prisa’s pay-TV unit Digital Plus, customer gains at the business beat “historic record levels” at the end of August and beginning of September, Cebrian said. It’s also kept the average revenue per user “stable or even growing,” after the government’s increase in value-added tax this month, he said.

Telefonica SA (TEF), Spain’s biggest phone company, and commercial television station Mediaset Espana (TL5) Comunicacion SA, each hold a 22 percent stake in Digital Plus. Telefonica said in June it planned to buy 100 million euros of two-year mandatory convertible bonds issued by Prisa .

Cebrian ruled out an imminent sale of Prisa’s 17.3 percent stake in Spanish commercial television station Mediaset Espana as the shares are “unfairly punished.”

“It’s obviously not a strategic asset for us,” he said. “However, Mediaset Espana is worth more than the actual share price and when you sell an asset it needs to add some real value.”

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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