Telefonica in surprise Sogecable sale, Prisa hit

By Elisabeth O'Leary and Robert Hetz

MADRID (Reuters) - Spanish telecommunications group Telefonica SA (TEF.MC: Quote, Profile, Research) said on Friday it would sell its 16.8 percent stake in pay-TV company Sogecable SA (SGCE.MC: Quote, Profile, Research), an about face that sent shares in Sogecable's parent Prisa (PRS.MC: Quote, Profile, Research) lower.

"This is an unpleasant surprise for Prisa because it means shelling out another 650 million euros ($1 billion) in its (Sogecable) bid," said an analyst at a foreign brokerage in Madrid.

The move set tongues wagging about Prisa's options in an upcoming reorganization of its TV business, now that it will not have the support of the euro zone's biggest telecoms company via Telefonica's holding.

Prisa's shares closed down 1.8 percent at 11.04 euros, off an earlier low of 10.42 euros. Analysts said it indicated the situation had perhaps not worsened radically for its newspapers-to-TV empire.

"It's a surprise, it increases the cost of the deal, but it doesn't change much beyond that. In the end, Prisa will merge with Sogecable and will likely want to sell its pay-TV business. But that's not going to happen in the short term," said Cristina Alvarez, analyst at ING in Madrid.

She argued Prisa still had to resolve a football rights conflict, currently in the courts, and confront a difficult economic climate with its Digital Plus pay-TV arm no longer growing to potential. These factors would curb a possible sale.

In a statement later Friday, Prisa said it expected to get 95 percent of Sogecable's shares, a result that would be "very satisfactory." It soon hoped to start the restructuring.

Prisa offered 28 euros per share for Sogecable late last year, a bid it was obliged to make after its stake in the unit topped 50 percent.