Doomed digital deal
Spain's Telefonica, Sogecable nix merging platforms
Launching such digital platforms in all the major European countries has been the biggest financial undertaking by media concerns this decade.
It is unclear, however, whether Telefonica's move is intended as a strong-arm tactic to pressure Sogecable into obtaining better conditions for a single platform, or if Telefonica is really intent on going its own way. When drawing up an in-principle agreement July 21 to create a single digital operator in Spain, Sogecable and Telefonica took the unusual step of giving themselves just two months to reach a detailed agreement on how that merger would work.
Talks fail
But early Thursday, Sogecable issued a brief press release stating that Sogecable and Telefonica had failed to reach an agreement on the merger of their digital platforms within the stipulated negotiating period.
"The major difficulties have come in estimating the value" of Spain's two digital operators, following surveys conducted by J.P. Morgan and Goldman Sachs, the statement said.
Sources on both sides of the negotiations suggested throughout the day that the two companies had not suspended talks, which would now be prolonged into the fall.
"It's completely natural that CSD and Via Digital haven't come to an agreement over such complicated negotiations such as the values of their huge rights catalogs," said one informed source.Telefonica reactsBut late on Thursday the Sogecable press release was followed by an explosive release from Telefonica that left little room for maneuvering.
Merger talks were "over," said the Telefonica release.
"The differences in evaluations of the platforms' worth, shareholding structures, management models and program content make a joint platform unviable," the press statement continued.
The bone of contention between Spain's digital rivals appears to have been Spanish soccer rights.
While talks were taking place, CSD agreed to share its pay-per-view soccer rights with Via Digital, allowing both platforms to broadcast all of Spain's premier league games. Telefonica could be reacting strongly to press ads run Thursday by CSD reminding potential subscribers that, with the in-principle agreement now technically lapsing, CSD would be broadcasting Spanish soccer games exclusively on its pay-per-view services.
The sudden flare-up in Spanish digital relations leaves the future uncertain. Spain may once more be faced by the prospect of two digital platforms when all analysts agree that one or both operators, given the small size of Spain's market, will lose its shirt by going it alone.
