Uncertainty Rains on Spain DTH Merger


Madrid, Spain -- Spanish direct-to-home platforms Vía
Digital and Canal Satelite Digital, which earlier this year announced plans to merge their
operations, are now only agreeing to disagree.

The platforms' parent companies -- Telefónica S.A. at
Vía Digital and Sogecable at CSD -- are unable to agree on four issues, a Vía Digital
source said. Those points of contention are the value of their current separate
investments, and the programming, management and shareholding structure of the merged
digital DTH service.

Adding to the confusion, a source at CSD said the only
issue addressed during the negotiations, which were expected to conclude Sept. 30, was the
valuation of the platforms.

According to the CSD source, investment bank J. P. Morgan
-- which Vía Digital hired to calculate the value of CSD -- did not factor in the
platform's exclusive rights to the country's top soccer matches through the
2000-2001 season.

That "undervalues the company," said a Sogecable

CSD has about 550,000 subscribers, while Vía Digital has
about 330,000 subscribers. As recently as Sept. 30, a source close to the negotiations
said both companies were still "studying the formula to become just one platform;
either a merger or a takeover."

Sogecable also announced that day that it "reaffirms
its disposition to dialogue to reach an agreement." Telefónica, on the other hand,
said it viewed the merger talks as over, and would continue to compete with CSD.

"Having two DTH platforms encourages business and we
are doing very well, so we will continue business by ourselves," said Pedro Pérez,
president of Vía Digital.

CSD was expected to own 50 percent of the merged platform,
with Telefónica holding 30 percent. The remaining 20 percent could go to Time Warner Inc.
and The Walt Disney Co., which both hold options to buy into Sogecable through prior
programming agreements. A source from Vía Digital said the percentages were still being