Telefonica SA’s share price down, to acquire 22% in the pay-TV unit of DTS for full ownership

Telefonica SA, the largest phone company in Spain, made an official announcement that it reached an agreement over the acquisition of the 22% stake of Mediaset SpA in Distribuidora de Television Digital, in a bid to take full control of the pay-TV operator.

The deal is estimated at 295 million euros ($401 million). Telefonica SA already holds a 22% stake in Distribuidora de Television Digital and is awaiting regulatory approval for acquiring the rest of DTS from Promotora de Informaciones SA.

The acquisition of Distribuidora de Television Digital is “a very smart decision by Telefonica, because even more than the TV business itself what they are aiming at is to avoid net losses of mobile-phone clients,” German Garcia Bou, analyst at Madrid-based Ahorro Corporacion Financiera commented for Bloomberg before the deal was announced.

The announcement came as another deal between Telefonica SA and Mediaset SpA over the acquisition of a 11.11% stake in its pay-television business called Mediaset Premium is coming to fruition. According to the terms of the deal, Telefonica is to invest 100 million euros ($136 million) in a new 900 million-euro equity, with a sizable chunk of the financing yet to be acquired. Al Jazeera and Vivendi SA have been hinted as possible investors.

Mediaset said the deal marks “an important alliance…for future cooperation in [the two companies] respective pay-TV activities in terms of technology, know-how and content,” the Wall Street Journal reported.

Telefonica SA dropped 0.95% to trade at 12.5050 euro per share by 11:20 GMT, marking a one year change of +34.80%. According to information published on the Financial Times, the 31 analysts offering 12-month price targets for Telefonica SA have a median target of 12.00, with a high estimate of 14.50 and a low estimate of 8.20. The median estimate represents a -4.95% decrease from the last price of 12.63.