Spain’s Prisa is a very important player in the Latin American media and advertising markets it recently launched its Union Radio panregional venture. Through Union Radio Prisa owns several radio assets in major Latin American countries. In addition, it majority owns text publishing behemoth Santillana which has an important presence throughout the region.
Like other international media groups, Spain’s Prisa had to devote virtually all of 2009 to restructuring its businesses, streamlining its operations and divesting itself of assets in order to pay down its heavy financial debt of about $7 billion, largely resulting from its acquisition of Sogecable, Spain's leading pay-TV company and TV network owner.
DIVESTITURES: Two years ago, Prisa launched a bid for the 50% stake of Sogecable not under its control in order to make the company the center of its audiovisual strategy. The worsening economic situation and subsequent fall in group revenues, plus pressure from creditor banks, shattered the company’s plans and forced Prisa to develop an asset sales policy. These asset sales included 25% of its Santillana publishing division and up to 35% of Portuguese group Media Capital. In the last months of 2009, it also sold 43% of its pay-TV business (21% to Telefonica and 22% to Telecinco) and its entire TV network Cuatro, which will be folded into Telecinco in exchange for an 18% stake in the latter. This last transaction, which is estimated to close by mid-2010 and still needs to be approved by competition authorities, would mean that Prisa’s role in Spain’s television business would be considerably reduced, although it would still keep majority control over its pay-TV business.
REDEFINING STRATEGY: A change of this magnitude — Sogecable accounted for 34% of Prisa’s EBITDA in 2008 — forces the group to redefine its strategy. Prisa executives see this as a necessary response to the transformation process being experienced by the communications industry worldwide.
Although group head Ignacio Polanco has not made any public statements about the company’s new situation, mainly because its TV divestments have not yet been completed, Prisa has taken some steps that give a glimpse of where it’s headed. In late January, upon the appointment of a new Director of Digital Business (Kamal M. Bherwani) and a new Director of Corporate Development (Andres Cardo, previously Regional Manager of Prisa in Brazil), the company announced that the new appointments marked "the beginning of a new business strategy for the Group, and a paradigm shift in our development," adding that the new executives’ main goal would be to work towards "transforming Prisa’s business model so our operations can develop in a technologically advanced environment and decisively personalizing them for the millions of consumers of our Group’s products.” According to a company spokeswoman, Prisa’s future revolves around becoming a platform for generating content in Spanish and Portuguese, regardless of the medium or channel used to distribute it, or the country it is generated in.
AMERICAN MARKETS: In line with this thinking, the U.S. Hispanic market and the different Latin American markets continue to be a priority for Prisa and will become even more important. This strategy is bolstered by the appointment of Andres Cardo, of Peru, whose experience in several of these markets will be drawn upon.
This appointment also coincided with two significant events. First, the agreement reached between Santillana Publishing USA and Hispanic Communications Network to offer Hispanics free access to exclusive and entertaining information based on book excerpts from Santillana publishing. The second was the introduction of Union Radio to advertisers and media agencies in Miami in late January. Let’s not forget that Union Radio’s shareholder body joined venture capital firm 3i just over a year ago, and one of the objectives of that deal was to strengthen the presence of Prisa's radio division in the U.S.
In 2008, Prisa's Latin American businesses were responsible for 13% of its group revenues, with Brazil, Mexico and Colombia being the largest markets by volume, and its most relevant segments were precisely those of publishing (Grupo Santillana) and radio (Unión Radio).
SPAIN BATTLE: Nevertheless, it is no secret that Prisa's fate lies in its performance in the Spanish market, where it generates 87% of overall revenues. And domestically, the group relies primarily on the recovery of advertising sales (which are predicted to fall another 5% in 2010).
Working against Prisa is its divestment policy, which will significantly reduce its assets, meaning the company will have to make additional efforts to overcome its still considerable, although less pressing, debt. To its favor, it still owns media leaders in segments such as newspapers (El País) and radio (Cadena SER), and market leaders are always better at weathering advertising crisis.