Investment analysts at Morgan Stanley Dean Witter believe Spanish pay-TV operator Sogecable is in an "excellent position" to take advantage of "one of Europe’s most attractive pay-TV markets."

Sogecable, operator of the Canal Satelite Digital (CSD) bouquet, is set to float on Madrid’s Bolsa exchange, placing 25 per cent of its equity, and hoping to raise around Euro480 million (Pounds 314 million). Morgan Stanley is co-ordinating the listing. The share price will be announced July 19.

"So far," said Morgan’s analyst Sarah Simon, CSD has "emerged victorious over [competitor] Via Digital…and we believe that Canal Plus Espana and CSD have emerged the clear winners in the battle for pay-TV subscribers, with [Canal Plus and CSD having] 1.74 million subscribers at the end of May versus 286,496 for Via Digital." However, that market position has not been achieved without a heavy cost. Competition from Via Digital has meant free set-top boxes, heavy price discounting and promotional campaigns, which CSD has had to match. Morgan Stanley suggests that Via Digital could mount a "scorched-earth policy" in a bid to win a greater share of subscribers.

The report also warned that Via Digital will be a stronger opponent now that it has a share of Spanish soccer rights. But even in this regard Morgan Stanley favours the CSD soccer proposition which "we think benefits Sogecable significantly," in terms of price paid and security over the soccer asset which is now in place for the next ten years. Nevertheless, Sogecable can expect even fiercer competition from Via Digital, said Simon. Morgan Stanley also mentions two further potential investors in Sogecable: Disney and Time Warner, both of which have options to invest (Disney 5 per cent; Time Warner 10 per cent) with Disney currently the likeliest to exercise its option. Morgan Stanley said the obvious potential for exclusive movie rights was clear, although it also suggested that the merits for either studio in direct involvement are few.