Viacom (NASDAQ:VIAB) and Telecom Italia Media have signed an agreement for sale of the 51% stake in MTV Italia to Viacom.  Viacom currently owns 49% stake in the Italian version of the popular music network.
With the acquisition of MTV Italia, Viacom will grow its portfolio of owned and operated television networks in Italy, which also includes Nickelodeon, Nick Jr. and Comedy Central. Going forward, we expect the network in Italy to generate higher advertising revenues due to its recent transformation from a purely music channel to a more entertainment oriented channel targeting a wider audience.
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Telecom Italia To Sell Its Stake To Viacom
Yesterday, Telecom Italia Media agreed to sell its 51% stake in MTV Italia to Viacom. The Italian media company shall receive a consideration of €10 million that will be adjusted on working capital changes upon closing. Additionally, as part of the transaction, Telecom Italia Media committed itself to waive its financial receivables of €9.7 million due from MTV Italia. Both of the companies expect to close the deal by the end of September 2013, subject to the receipt of the necessary authorization in accordance with the law and applicable regulation.  Upon completion of the transaction, Viacom will have full editorial and operational control of all MTV Italy properties, including MTV, MTV Music, MTV Classic, MTV HITS music channels, www.mtv.it and MTV Pubblicità.
MTV Italia Network
MTV Italia is the Italian-speaking version of the popular 24-hour music and youth entertainment channel. It is being controlled by Telecom Italia Media (51%) and Viacom (49%). The channel features several shows that are made up locally, featuring Italian music and artists. Some of the most popular shows on the channel are the Italian version of Total Request Live, LoveLine, Brand New, other are original ones like Very Victoria, Italo-Francese, Avere Ventanni and Hitlist Italia. The channel also shows a variety of reality shows (mainly imported from MTV US) and TV series such as Scrubs, Less Than Perfect and The Office. Since 1999, the channel has shown several Japanese anime on a regular basis. 
How is MTV Italia Performing?
For Telecom Italia, MTV Group revenues declined by 25% to €55 million in 2012 as compared to €74 million in 2011. This reduction was mainly due to lower advertising revenues, which were €40 million in 2012 as compared to €50 million in 2011. This resulted in EBITDA for the network to be around €(11) million as compared to €6 million in 2011, which can be attributed to the decrease in revenues and as a result of the profound editorial transformation of the main channel. 
Telecom Italia Media has set ambitious financial targets for MTV Italia forecasting 25% growth in advertising revenue in the coming years and a change of schedule to boost its ratings. CEO Paolo Tavaglia stated that MTV Italia will become a new entertainment channel with a more in-depth relation with advertisers and targeting an audience that it is difficult to reach with other channels.  With improved advertising, the company expects the network to have a positive EBITDA margin of around 8-10 percent by the end of the three-year plan for 2013-2015.
Our price estimate for Viacom stands at $67, roughly in line with the current market price.Notes:
- Telecom Italia Media and Viacom sign agreement for the sale of MTV Italia, Telecom Italia Media Press Release, Jul 4, 2013 [↩] [↩]
- MTV Italy Official Website [↩]
- Telecom Italia Media 2012 Annual Report [↩]
- Telecom Italia Media targets 25% ad growth for MTV Italia, Telecom Papers, Mar 6, 2013 [↩]