EU OKs digital deal

Murdoch to merge Telepiu with Stream

ROME — European competition commissioner Mario Monti gave his approval Wednesday to News Corp.’s €900 million ($981 million) acquisition of Vivendi Universal’s Italian digital paybox, Telepiu.

News Corp. chief Rupert Murdoch had been waiting five months for the greenlight, which put watchdog Monti in the unusual position of backing a virtual monopoly. Murdoch intends to merge Telepiu with his Stream, the country’s only other digital platform, to create Sky Italia.

New channel is a joint venture with Telecom Italia: News Corp. will have 81% of the company, Telecom 19%.

In fact, Monti had little choice. Both payboxes are in financial difficulty, and the insolvency of either one would have left the other with a monopoly by default. Neither Stream nor Telepiu have made a profit since their launches in 1996 and 1991, respectively.

Terms of engagement

But Monti slapped strict antitrust conditions on his approval, limiting the length of movie deals to three years and contracts with soccer clubs to two years.

In addition, limits have been placed on Sky Italia’s expansion in Italy — the company is required to divest Telepiu’s terrestrial stations for digital TV, and the paybox must give sat competitors access to its platform. Monti hopes these conditions will allow for the creation of another digital TV net by 2006.

News Corp. execs expressed “satisfaction” with the European Union commission’s approval, which brings Murdoch closer to achieving his dream of building a global TV empire.

“We are delighted that the commission has cleared the merger; however, we must still wait for the conclusion of the Italian regulatory process,” said News Corp. Europe chairman Marty Pompadur.

Italian regulators are set to rubber-stamp the deal within the next two weeks. Murdoch is expected to present the new company in a news conference in Rome on April 30.

Going for gold

News Corp. hopes to make Sky Italia profitable with around 3.2 million subscribers, a goal expected to be reached within 18-24 months of completion of the deal. But it will face tough challenges amid rampant piracy and a sweeping range of terrestrial channels.

It is due to start beaming to homes by Aug. 31, the start of the championship games of the Serie A– Italy’s top soccer league.

Of the total proceeds of the sale, Vivendi U will receive around $465 million in cash, with the rest comprising debt-reduction coin. When the deal was first announced in October, Vivendi U said the cash payment would be reduced by the amount of outstanding accounts payable at closing. This figure had originally been expected to be around $215 million, though analysts suspect it could be lower when the deal formally closes.

(Reuters and Bobbie Whiteman in Los Angeles contributed to this report.)

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