UPDATE 1-Spain to remove advertising from state TV

Fri May 8, 2009 2:45pm BST

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* Draft plan approved to eliminate ads from state TV

* Private firms, telecos will compensate via revenue tax

* TL5 up 4.59 pct at 7.75 euros, A3TV up 9.11 pct at 5.51 (Adds further details, government comment, share price)

MADRID, May 8 (Reuters) - The Spanish government said on Friday it had approved a plan to end advertising on state TV channels La Primera and La Dos, a move which has boosted private companies' shares on hopes it will bring them more revenues.

Shares in private TV companies Telecinco (TL5.MC) and Antena 3 A3TV.MC have been rallying on hopes that their advertising revenues will rise once state TV is no longer touting for the same business.

Some analysts doubt this will be the case.

"We have taken a decisive step towards consolidating the system of financing state radio and television by eliminating advertising revenues definitively," Deputy Prime Minister Maria Teresa Fernandez de la Vega said after a cabinet meeting.

In order to compensate the state channels for loss of revenues, the private TV companies will be hit with a tax on their revenues of 3 percent and while telecom companies such as Telefonica (TEF.MC) face a lower rate of 0.9 percent.

TL5 shares were up 4.59 percent at 7.75 euros, while A3TV's rose 9.11 percent to 5.51. (Reporting by Elizabeth O'Leary and Judy MacInnes; Editing by Greg Mahlich)

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