CLT-Ufa draws digital line

Refuses to make further concessions for EU approval

LUXEMBOURG — CLT-Ufa, Europe’s largest broadcaster and key partner in a German digital TV alliance, said on Tuesday it would make no more concessions to win European Union approval for the deal, and feared the EU authority could now block it.

“We can’t be pushed any further,” CLT-Ufa president and chief executive officer Rolf Schmidt-Holtz said, adding that the European Commission’s demands would turn the deal into “a flop” that wasn’t “economically feasible.”

“We think the concessions made are an absolute maximum,” Schmidt-Holtz told a news conference assembled to present the company’s 1997 financial results. CLT-Ufa was formed in January 1997 from the merger of Audiofina’s CLT and Bertelsmann’s Ufa. Schmidt Holtz said the partners cannot afford to give another inch. “Any further concessions would put the profitability of the digital pay TV business at risk.”

Bertelsmann and CLT-Ufa agreed last year to merge their successful pay TV company, Premiere, with the TV interests of Bavarian kingpin Leo Kirch to get digital TV off the ground. The alliance put an end to a bitter rivalry between the two main German media players.

The deal, which also involves former German telco monopoly Deutsche Telekom, has met with stiff opposition from the European Commission, which is under pressure to act from rival German broadcasters and cable operators. They claim a Bertelsmann-Kirch alliance would lead to a lasting dominant position in the German pay TV market.

Schmidt-Holtz said representatives from the companies would fly to Brussels to meet with European Competition Commissioner Karel Van Miert later on Tuesday, but only to discuss details of the concessions made in the last weeks.

But even if the Commission blocked the deal, CLT-Ufa says it remains committed to digital television in Germany, despite it being a very costly business.

The company spent 5.8 billion Luxembourg francs ($160 million) in 1997 developing new business, including Premiere Digital, and was expecting to spend another $400 million this year.

Owing to these huge startup costs, it recorded a total loss of $70 million last year, and was expecting a negative result of $220 million in 1998, CLT-Ufa second president and CEO Remy Sautter said.

The company’s strongest performers were commercial webs RTL in Germany and M6 in France. But at the same time, CLT Ufa recorded startup losses on ventures such as Channel 5 in the U.K. and RTL Klub in Hungary.

The biggest drain on the group’s resources, however, is its stalled digital pay TV merger with Kirch.

“The delayed launch of digital pay TV has cost us well over 100 million marks ($56 million),” Schmidt Holtz told journalists.

In recent weeks, CLT Ufa and Kirch have plied the Commission with concessions, including an agreement to sell 25% of their premium pay TV rights and 25% of Beta Research (which is responsible for decoder technology) to competitors.

Last week, the partners conceded the right of private cable operators to package and distribute digital pay TV channels.

The Commission will announce its decision on the merger by June 3.

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