Cuatro and Telecinco will merge their operations

PRISA and its subsidiary Sogecable have reached an agreement with Telecinco as of today to merge their free to air TV operations. At the same time, Telecinco will take a significant stake in the pay TV operations of Digital+, which is controlled by Sogecable in its majority. For this purpose, they have subscribed a term sheet as of today, which has been formally approved by the Board of Directors of both companies.

This operation configures a new TV environment in Spain in which Telecinco will be the leader in free to air TV and Digital + in Pay TV.

As a consequence of the agreement, Telecinco will take a 22% stake in Digital+ and Sogecable will be the owner of a 22% of the new company to be created after the merger of the current Telecinco and Cuatro.

The sale of Digital + has been established considering a value of the assets of €2,350 million, in the same terms of the agreement signed between PRISA and Telefónica last 25^th November, 2009. The payment will be made in cash.

In order to integrate Cuatro and Telecinco, the last company will make a capital increase which will be subscribed by Sogecable contributing its free to air TV assets in exchange of the 22% of the capital of the new Telecinco. The participation of Sogecable in the new Telecinco will be defined once another capital increase in this company is executed before the aforementioned operation. This final stake will be around 18%.

PRISA and Telecinco will proportionately participate in the Governance Bodies of both Telecinco and Digital+ according to their respective stake in each of the companies.

These agreements are subjected to the normal reviewing processes, which will not last more than two months starting from the date of the writing of the contracts, and to the corresponding legal authorizations.

Telecinco has set the standard in the audiovisual world in Spain over the past few years thanks to a bold mix of both Spanish and international TV series as well as a wide range of live in-house productions. Its appeal to an attractive advertising segment and a widely admired management model has made it one of the most profitable TV broadcasters in Europe and the audience-share leader among commercial channels in Spain.

In 2007, Telecinco became a global leader for multimedia content when it acquired Endemol, the world's biggest production company, present in 25 countries.

The channel is successful in the online world too, where www.telecinco.es is Spain's  top-ranking TV web page in visitor numbers, page views and video downloads, with 6.5 million users on average in November. Since the beginning of this season, Telecinco has embarked on a strategy aimed at broadening the scope of its quality program schedule by launching the digital channels LaSiete and Factoría de Ficción, targeted at new audience segments and thus complementing Telecinco's existing ones ahead of the digital TV turn-on in Spain in April, 2010.

Cuatro is Sogecable's national free-to-view channel and enjoys the most positive commercial prospects in the market. Its business model is based on providing entertainment, news and quality innovation. Since going on air in 2006, it has developed a unique visual style which has lead to rapid growth and has seen the channel position itself as the most successful new-generation broadcaster in Europe. With an accumulated audience share of 8.3% this year, and 10.8% among its target audience, it has beaten all its own records - an unprecedented performance for such a young station. Cuatro has rolled out some of the most innovative products on the market  and offers a wide range of multimedia content, available across a wide range of platforms.

Digital+ is Spain's leading pay-TV package, reaching more than 2 million subscribers and a potential audience of 6.5 million viewers. Third quarter revenues for 2009 were 982 million euros. Its schedules include entertainment, news and other services across more than 150 channels and available via the digital TV receiver HD iPlus. Its big movie premiers and live sports events make it the leading digital TV provider nationwide.