Telefonica Said in Talks With Mediaset to Buy 22% DTS Stake

Telefonica SA (TEF) is in talks to buy Mediaset SpA (MS)’s 22 percent stake in Distribuidora de Television Digital SA to gain full ownership of the Spanish pay-TV company, according to people familiar with the matter.

Telefonica may pay about 350 million euros ($476 million) for the stake held by Mediaset Espana Comunicacion SA (TL5), the local unit of Italy’s largest media company, the people said, asking not to be identified because deliberations are private. Telefonica is awaiting a final decision by Milan-based Mediaset, owned by former Prime Minister Silvio Berlusconi, on whether to sell the stake, the people said.

Mediaset Espana shares rose as much as 1.3 percent, reversing earlier losses, and were up 0.3 percent at 8.27 euros at the close of Madrid trading. Telefonica fell 0.3 percent to 12.18 euros. Mediaset fell 0.6 percent to 3.52 euros in Milan.

Telefonica, Spain’s biggest phone company, is betting on TV programs to bolster its shrinking domestic phone business. Fully owning DTS would give it more flexibility in tailoring offers such as Movistar Fusion TV, a package of TV, landline, mobile-phone and Internet subscriptions. Mediaset has been considering options such as increasing or selling its DTS stake, people familiar with the matter said.

Photographer: Angel Navarrete/Bloomberg

Customers browse mobile handsets on display inside a Telefonica SA store in Madrid. Telefonica, Spain’s biggest phone company, is betting on TV programs to bolster its shrinking domestic phone business. Close

Customers browse mobile handsets on display inside a Telefonica SA store in Madrid.... Read More

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Photographer: Angel Navarrete/Bloomberg

Customers browse mobile handsets on display inside a Telefonica SA store in Madrid. Telefonica, Spain’s biggest phone company, is betting on TV programs to bolster its shrinking domestic phone business.

A representative of Madrid-based Telefonica declined to comment. Mediaset Espana hasn’t received any offers from Telefonica for its stake in DTS, the broadcaster said in an e-mailed statement today.

Full Control

“For Telefonica, gaining full control of DTS in its own market makes sense from an industrial point of view,” said Emilio Pucci, founder and director of e-Media Research Ltd. in London. Phone companies in general should boost their content offerings with premium TV content using fast broadband services, he said.

Telefonica said on June 2 that it agreed to buy a 56 percent stake in DTS from Promotora de Informaciones SA (PRS) for 750 million euros to increase its holding to 78 percent. Mediaset Espana has 15 days from when the DTS board informs it of terms of the deal to exercise a preferential right to buy the asset.

Telefonica slowed a decline in its wireless business in Spain, with revenue falling 10 percent in the first quarter quarter after a 21 percent drop for 2013. The company is seeking to fend off intensifying competition from Jazztel Plc and Vodafone Group Plc in its home market.

To contact the reporters on this story: Manuel Baigorri in London at mbaigorri@bloomberg.net; Daniele Lepido in Milan at dlepido1@bloomberg.net

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net Robert Valpuesta

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