Spain's two mammoth digital satellite pay-TV platforms are merging, an event which will drastically transform the Spanish media landscape - for better or worse.

Partners Sogecable and Telefonica met the government's January 29 deadline for the merger of their platforms Canal Satelite Digital (CSD) and Via Digital.

The merger of the two loss-making businesses will launch with 2.5m subscribers and combined revenues worth Euros 1.3bn in 2002.

As part of the deal, Via Digital and Sogecable agreed to bring their debts down to Euros 425m and Euros 705m respectively. Managing the combined debt of the platforms was a priority issue during merger negotiations.

Sogecable is a joint venture between Spanish publishers Prisa and Groupe Canal Plus, a subsidiary of beleaguered Vivendi Universal.

In a joint statement, the two companies said they would appeal against some of the 34 conditions the Spanish government imposed on the merger, including limitations on prices, distribution, strategic accords and the five-year duration of the government conditions.

One of the thorniest issues has been the four-year price-fixing on subscriber's fees. The 34 conditions also include regulations concerning the acquisition, exploitation, resale and distribution of content from the Hollywood studios, and the handling of rights to football matches and thematic channels.

Local reports on Wednesday night claimed the conditions under appeal were not related to film or football, but rather to subscriber's fees, internet exploitation, third-party channel inclusion and strategic accords with Sogecable/Telefonica sister companies.

The agreement will see Telefonica take an equal 16.28% share in Sogecable, alongside Spanish media giant Grupo Prisa and France's Groupe Canal Plus (Vivendi Universal).

But new to the agreement is a clause allowing Telefonica to increase its share. Telefonica also agreed to maintain its participation in Sogecable for a minimum of three years.

The only existing pay-TV competition in Spain - following the closure last May of DTT platform Quiero TV - will be fledgling cable operators Ono and Auna, who could appeal against the merger to European authorities.

Further complicating matters is new TV legislation which will bar companies from owning shares in two different broadcasters. This would affect both Telefonica, which owns 47.4% of Antena 3, and Prisa, which owns dozens of local stations through holding Localia.