Rival satcasters in merger talks

Economic slowdown, advance of digital TV make Canal/TPS union likely

PARIS — Informal talks are getting under way to merge France’s rival satellite platforms Canal Satellite and TPS “within months,” a source close to shareholders told Daily Variety on Monday.

Until recently, the platforms’ shareholders would have nixed the idea. But the gloomy economic climate, coupled with the introduction of digital terrestrial TV in France next year, have prompted a rethink.

Speaking to Daily Variety at the Deauville Film Fest, Canal Plus Group chief operating officer Denis Olivennes said the move would be “logical,” given the European trend toward consolidation.

He said: “Germany has a single operator, both Italy and Poland are to have a single operator. Whether or not it would be politically or legally allowed in France is another matter.”

The prospect of a Canal Satellite-TPS merger comes in the midst of a shakeup at the Canal Plus Group, which became Vivendi Universal’s TV and Film division, incorporating Universal Studios, last year. In recent weeks, the group has announced the merger of loss-making pay TV operations with those of its rivals in Italy and Poland. And in Scandinavia, where it was also up against a competing platform, it has sold its stake to partner Telnor, which will continue to distribute Canal Plus’ premium channel.

Upheavals at TPS

There have also been upheavals at TPS, culminating in the announcement last week that platform founder and TF1 CEO Patrick Le Lay was stepping down as prexy. On the same day Gerard Mestrallet, CEO of French utilities and communications group Suez, gave up his seat on the board of administration.

TF1 and Suez each own 25% of the platform, while M6 (in which Suez is a major shareholder along with Germany’s Bertelsmann) owns another 25%, France Telecom owns 17% and France Television 8%. It was TPS’ complex shareholder structure that was at the heart of a spat recently between Le Lay and other board members, over TPS’ decision to broadcast M6’s ratings-smashing reality show “Loft Story” on one of its channels. Le Lay failed to get the show pulled.

But by naming Emmanuel Florent, described by TF1 insiders as Le Lay’s “loyal soldier,” to replace him as prexy, the TF1 CEO has conveyed his wish to stay in command of the platform.

Head-to-head competition

European antitrust authorities have held France up as an example of a country where two satellite platforms co-exist, but the reality is different, with fierce competition costing both Canal Satellite and TPS dearly, and a slow-down in subscription rates bringing diminishing returns.

Canal Satellite, with 1.67 million subscribers, broke even for the first time last year, while TPS, which has 1.04 million subscribers, has yet to break even. Canal Satellite predicts its subscribers will grow 10-15% this year, while TPS has predicted 4% growth, but together the platforms’ commercial future would be far more rosy.

Expect much jockeying for position as shareholders on both sides seek the best deal for themselves. At TPS, it has been suggested that TF1 could buy out Suez, creating a stronger bargaining position for itself ahead of negotiations with Canal Plus Group and Lagardere, which owns a 30% stake in Canal Satellite.

There would also be fierce debate over the value of the two platforms. Canal Plus execs have already started talking up Canal Satellite’s worth, while pointing out TPS’ weaker position.

Sources for the other camp stress that TPS’ group of wealthy shareholders brings to the negotiating table financial might that will be invaluable to a combined platform’s future development.

The merger faces regulatory hurdles in France and Europe, as well as political opposition in a country where media concentration is considered to be the enemy of “cultural diversity.”

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