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Rupe in Italo loop with Telepiu deal

Murdoch gets foothold in continental Europe

April has been kind to News Corp. chairman Rupert Murdoch.

Fresh off his long-sought acquisition of U.S. satcaster DirecTV, Murdoch was granted an absolute monopoly in the Italian pay-TV market Wednesday as he formally closed the purchase of Telepiu from Vivendi Universal.

The $871 million euros ($969 million) deal, including $500 million in cash, gives Murdoch his first significant foothold in continental Europe. He controls giant BSkyB in the U.K. and also has satellite ventures in Asia and Latin America. The $6.6 billion purchase of DirecTV parent Hughes announced April 9 adds 10 million satellite subscribers and immense clout in the U.S. TV market.

The Telepiu pact was unveiled last June but the two sides haggled over price and it took months to gain regulatory approvals from Rome and Brussels.

European competition commissioner Mario Monti blessed the deal April 2.

Murdoch plans to merge Telepiu with smaller rival Stream, Italy’s only other pay TV service, meaning he’ll dominate the market. But Monti had little choice in the matter since both services may have gone bankrupt without a merger and the support of a deep-pocketed parent.

The transaction creates a new entity called Sky Italia with 1.86 million subscribers and annual revenue of about $1 billion. News Corp. owns 80% and Italo partner Telecom Italia holds the rest.

Local reaction was less than jubilant.

“The (Italian) political world and most of the industry do not like Murdoch to have too much power in Italy,” said media analyst Augusto Preta. He said trepidation as well as caveats slapped on the merger by the EU means “life will not be easy for Murdoch in Italy.”

Monti limited the length of Sky Italia’s movie deals to three years and contracts with soccer clubs to two years. It is obligated to carry programming from its rivals and to divest Telepiu’s terrestrial stations. Monti said he hopes the conditions will allow for the creation of another digital TV net by 2006.

Vivendi sold Telepiu as part of a push over the past year to pare down its debt by unloading non-core assets.

The acquisition agreement calls for legal disputes between Stream and Telepiu, and between Vivendi’s Canal Plus and News Corp. subsid NDS to be dropped.

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