Mediaset profits down after ad slump

Co.'s profits for the first three quarters was $469 mil

ROME — A larger-than-expected advertising slump continued to eat into Mediaset’s bottom line as Italy’s largest media company on Tuesday reported a 20.5% year-on-year decline in net profit for the first nine months of 2006.

The Silvio Berlusconi-controlled company, which operates terrestrial TV channels Canale 5 and Italia Uno, said profits for the first three quarters was e369.1 million ($469 million), underperforming most analysts’ forecasts.

According to a Reuters poll of analysts, Mediaset was expected to report a nine-month net profit of $477.8 million, down from $593 million a year ago.

 Net revenue through the first nine months was up 0.7% to $3.4 billion.

Despite the results, Mediaset said it would not pull back on expansion plans. The company’s board on Tuesday approved a plan to investigate the buyout of German broadcaster ProSiebenSat 1, a deal that, if pursued, could be worth $6.3 billion.

Mediaset has been hit particularly hard by falling advertising revenues and rising programming costs. For the first nine months of 2006, ad revenues fell 0.9% to $2.63 billion.

The company again downgraded its full-year advertising forecast, expecting zero growth in this pivotal business area. Previously, it had expected full-year ad revenues to climb 2% to 3% year on year.

Mediaset has only recently recovered in the ratings battle with state pubcaster RAI.

It expects the ad business to pick up in the fourth quarter, but not enough to improve its diminished ad forecast.

RAI and satcaster Sky Italia won the broadcast rights to summer’s soccer World Cup tournament, which Italy won, leaving Mediaset out of the single biggest viewing event of the year.

Along with a recent ratings recovery, the company has seen improvements in its pay-per-view business, which suffered at the start of the professional soccer season in September due to a major match-fixing scandal that affected some of the nation’s most popular clubs.

The share price, which tends to follow the political fortunes of Berlusconi, is down 9% to $11.43 since he was voted out of power as Italy’s prime minister in April.

During the same period, the Dow Jones Stoxx media index, which measures the share price of Europe’s largest media companies, rose 3%.

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