Canal Plus spins French Web

Adds Internet services to growing list of stakes

PARIS — France’s pay TV giant Canal Plus has added Internet online services to the growing list of business interests in which it holds an equity stake.

Canal Plus and telephone company Cegetel have signed a memorandum of understanding with U.S. Net-access colossus America Online (AOL) and German media octopus Bertelsmann AG that will give the paybox and Cegetel 55% stakes in AOL France and CompuServe France (pending the completion of the CompuServe Europe acquisition by AOL and Bertelsmann).

The deal marks the first major pact between Canal Plus and Bertelsmann since their plans to develop digital television in Germany began to unravel following the merger between CLT and Bertelsmann’s audiovisual arm Ufa in 1996.

The agreement also underlines Compagnie Generale des Eaux’s ambitions to marry its telephony business (CGE owns Cegetel) with content providers (CGE is Havas’ main backer and Havas is the largest shareholder of Canal Plus) in order to exploit the underdeveloped Gallic Internet market. Current estimates are that only 2% of the French population is connected to the Internet, compared to 6% in the U.K. and 20% in the U.S.

Under the terms of the agreement, Cegetel will seek to transfer subscribers to its Havas On Line service to the new entity. The new venture will consist of brand names AOL by Cegetel and CompuServe by Cegetel, targeting the consumer market and professional users, respectively, and accessible via traditional telephony.

AOL by Canal Plus will be the consumer brand delivered via cable and satellite technology. At the outset, AOL France, CompuServe France and Havas On Line will total more than 200,000 subscribers, with more than 50% of that coming from AOL France.

Commenting on the agreement, which is expected to be completed in the next few weeks, CGE chairman Jean-Marie Messier noted, “This alliance brings together the four most innovative and dynamic partners in the field of telecommunications (Cegetel), Internet online services (AOL-Bertelsmann) and media (Canal Plus). It is a concrete and promising illustration of the strategy of Generale des Eaux in those areas and of the convergence of the worlds of telecommunications and content.”

For Canal Plus, the challenge will be to provide attractive content, which company chairman Pierre Lescure believes is needed to encourage the French to subscribe.

This pact is likely to fuel speculation over future cooperation between Canal Plus, Bertelsmann and Generale des Eaux. At a Paris press conference on Thursday, Lescure, Messier and Thomas Middelhoff, who takes over as Bertelsmann’s chairman and CEO in October, were positively brimming with compliments for each other.

Canal Plus would dearly like to woo CLT-Ufa away from France’s Television Par Satellite digital consortium, which rivals its own Canal Satellite digital outlet. Messier is known to get on well with Middelhoff — both men are in their early 40s and have five kids apiece — and has gone on the record as saying that he sees a logical fit between Canal Plus and Bertelsmann’s media ambitions.

Few people who witnessed the Paris press confab believe that this will be the last time Messier, Lescure and Middlehoff appear on the same stage together.

(John Voland in Los Angeles contributed to this story.)

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