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CANAL PLUS REPORTS ’96 PROFIT UP 11.3%

PARIS — French pay cabler Canal Plus’ profits for 1996 jumped 11.3%, to 741 million francs ($130 million), but the pay TV giant warned Wednesday that its merger with the Dutch-based NetHold group, due to be finalized next month, could mean that Canal Plus will show no profit for ’97.

Following Wednesday’s Canal Plus board meeting, the giant pay TV company, which posted profits of $116 million in 1995, reported that revenues had risen 14.5% to $2 billion.

While revenues were slightly higher than most financial analysts had predicted, profits were lower than expectations, largely because the company provisioned to the tune of $11 million for what it described as “contingency reserves set aside to cover risks on certain investments.”

The bulk of the company’s revenues continue to come from French-based pay television subscribers. Canal Plus subscriptions in France are now running at around 4.2 million, with revenues just over $1.4 billion. Consolidated revenues were also given a big boost last year by the first-time inclusion of results from UGC D.A., France’s largest film rights company, which was acquired by Canal Plus last year.

Consolidated operating income remained virtually identical to 1995 at $259 million, despite the fact that operating losses at Canal Satellite rose because of the cost of the April 1996 launch of the Canal Satellite digital platform. Canal Plus has been making strenuous efforts to peg back its own operating expenses. The company’s unprofitable film production arm, Studio Canal Plus, “significantly reduced its operating loss after refocusing its business on France and the rest of Europe.”

Although Canal Plus did not give details, signs are that the company’s key foreign investments will be critical in helping absorb the costs of the NetHold merger.

Canal Plus Spain has seen subs rise by more than 13% to about 1.3 million, while the addition last year of extra soccer games in Germany helped double subs to the channel, with the total now standing at about 1.4 million. Canal Plus has a 37.5% stake in Premiere alongside the Kirch and Bertelsmann groups.

The two big clouds on the horizon, according to analysts who spoke with Daily Variety, is how well Canal Plus will handle the absorption of unprofitable NetHold while also fighting a digital war on its home turf.

Since its creation in 1984, Canal Plus has enjoyed a virtual monopoly on pay television in France and has been able to expand its business on the back of the huge subscription revenues it earns at home. Now it faces a challenger in the form of the TF1-led digital consortium Television Par Satellite.

Latest indications are that Canal Satellite’s digital platform has about 280,000 subscribers, garnered since its April 1996 launch. TPS started operating in December and claims it will have 100,000 subscribers by the end of March — the kind of upbeat result which has left some observers gasping.

With the NetHold merger still not officially signed, Canal Plus is remaining coy about any figures, but a recent report from Morgan Stanley’s London office predicted that the merger will contribute to a small loss for Canal Plus in 1997 and a much more significant amount of red ink in 1998.

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