Mediaset Shares Fall Amid Struggle to Recover From Ad Slump

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Shares fell in Mediaset SpA as analysts downgraded the broadcaster controlled by former Italian Prime Minister Silvio Berlusconi and said that its recovery in advertising sales is too slow.

HSBC Holdings Plc cut the stock to hold from buy, saying that the company’s forecast for ad revenue in the second quarter is “underwhelming.” Equita Sim SpA also reduced Mediaset to hold from buy.

Mediaset, which competes with Rupert Murdoch’s pay-TV provider Sky Italia, said on Tuesday that revenue increased last quarter as advertising sales in Italy showed first signs of recovery in March. Shares dropped as much as 6 percent in Milan and were down 4 percent at 4.44 euros at 11:58 a.m., giving the company a market value of 5.24 billion euros ($5.9 billion).

“Italian market still appealing, momentum is weak,” HSBC said in a report Tuesday. The enterprise value of Mediaset’s free-TV operation is still almost 80 percent below its 2007 peak, HSBC analysts said. Broadcasters are momentum plays and that isn’t going into the right direction, they said.

Mediaset is cutting costs while boosting spending on programs to lure customers. As part of its strategy to gain exclusive content, a year ago Mediaset beat Sky Italia by bidding about 700 million euros for the rights to broadcast soccer’s UEFA Champions League for the period from 2015 to 2018.

In the first quarter, television ad sales declined 2 percent in Italy to 935.7 million euros, compared with 954.4 million euros a year earlier, according to a statement by researcher Nielsen NV on Tuesday.

Vivendi Questions

Mediaset faced questions, on Tuesday’s conference call with analysts, after people familiar with the matter last month said that Vivendi SA may make an investment in Mediaset, possibly also involving Telecom Italia SpA.

“I can rule out a bid for a Telecom Italia stake,” Mediaset’s Chief Financial Officer Marco Giordani said on the call. “We are just open to commercial partnership for our pay-TV unit Premium.” While the company is not a seller of Premium, it is open to a new partner, he said.

Last month, Berlusconi’s eldest son, Mediaset Deputy Chairman Pier Silvio Berlusconi became chief executive officer, replacing Giuliano Adreani, who has held the position since 2000. Adreani, 72, will remain chairman of Publitalia 80 SpA, the group’s advertising unit.

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