* Telefonica agrees to pay 100 mln euros for Mediaset
* Deal marks further expansion of Telefonica into pay-TV
* Mediaset in talks with other potential investors
* Shares up 3 pct
(Adds details, shares)
MILAN, July 7 Spanish telecoms group Telefonica
has agreed to buy an 11.1 percent stake in the Italian
pay-TV business of Silvio Berlusconi's media group Mediaset
for 100 million euros ($136 million), Mediaset said on
The deal marks a further expansion of Telefonica into the
pay-TV industry days after buying Mediaset Espana's 22 percent
stake in Madrid-based pay-TV firm Distribuidora de Television,
known as Canal+.
Monday's agreement will also give Mediaset an ally at a time
when it is facing increasing costs for TV rights.
Mediaset shares rose 3 percent to 3.8 euros by 0703 GMT,
outperforming Milan's flat blue-chip index.
Mediaset said it would transfer its pay-TV activities to a
new company which will have an equity value of 900 million
Analysts at ICBPI said in a note to clients this valuation
appeared to be high given persistent uncertainties over future
profitability given expensive soccer TV rights.
Deputy Chairman Pier Silvio Berlusconi, son of former prime
minister Silvio, said last week Mediaset was in talks with
Qatari-owned broadcaster Al Jazeera and other players to
cooperate in the pay-TV business in Italy.
He said Italy's biggest commercial television broadcaster
was also in talks with French group Vivendi in an
interview with daily Corriere della Sera published on Monday.
"There is nothing concrete, but we are talking to other
partners that would give us access to the English-speaking
market, the world's first market followed by the Spanish one,"
Berlusconi told the paper.
Mediaset's advertising business has been hit by a long
recession, while Mediaset Premium has grappled with fierce
competition from rival Sky Italia, a unit of Rupert Murdoch's
21st Century Fox.
"We are dealing with global competitors, full of resources,
which are very aggressive and ruthless," Berlusconi told the
paper, adding that the company will need the international
alliances to remain competitive.
($1 = 0.7345 Euros)
(Reporting by Lisa Jucca and Agnieszka Flak, editing by Louise