Falling price follows profit warning

Mediaset shares fell again Monday as the Silvio Berlusconi-controlled broadcast group came under fire from analysts who are openly questioning the way it books TV advertising revenues.

The trouble started Thursday night following Mediaset’s surprise after-market statement that it expected 2006 net profit to dip 16.3% year on year to e505 million ($666 million), and that it was shifting some $118.5 million in advertising revenue from 2006 to 2007, creating a revenue shortfall for last year.

Announcement caught a number of analysts off guard. In a testy note to investors entitled “Credibility Lost,” a Merrill Lynch analyst downgraded the stock to neutral, saying the company failed to signal the 2006 revenue shortfall in previous statements.

In a follow-up research note, Goldman Sachs was more even-tempered but added that it expects Mediaset’s traditionally strong fourth quarter TV ad sales figures will have fallen by 9% year on year, signaling that the problems in Italy’s sagging TV ad market are perhaps worse than previously estimated.

Mediaset did not return calls for comment on Monday. But in a statement posted on its Web site on Friday, Mediaset CEO Giuliano Adreani said the company’s advertising sales unit, Publitalia, closed 2006 “in a very positive way, equaling the 2005 record results.”

He added he expects this year will be a better year for Publitalia than last. Mediaset was hit particularly hard in 2006 as rivals pubcaster RAI and Rupert Murdoch’s satcaster Sky Italia had the rights to the soccer World Cup and the Winter Olympics in Turin.

Still, investors were not impressed. Shares in Mediaset fell 5% on Friday and a further 1.2% on Monday. Company is scheduled to report full-year 2006 earnings on March 13.

In a related matter, Mediaset may be planning to launch eight digital terrestrial pay TV channels, Corriere della Sera reported over the weekend. The nets, dedicated to film, cartoons and women’s interests, would be priced at e8 ($10.60) per month in a bid to steal customers from Sky Italia, the newspaper said.

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