Kirch Group kibosh no minus for Canal

Cash from Premiere sale bolsters bottom line

PARIS — French pay television group Canal Plus said that Brussels’ decision to block the proposed German digital marriage between Bertelsmann and the Kirch Group will not have a negative effect on its 1998 financial results.

Last year Canal Plus sold its 37.5% stake in German paybox Premiere to Kirch for a reported 3.1 billion francs ($525 million). The sale helped Canal Plus to post record profits of $259 million for 1997, with revenues rising 17% to $2.3 billion. Without the Kirch cash, Canal Plus would have lost just over $100 million.

Under the terms of the Premiere deal, Canal Plus received the first $90 million in January and the majority of the remaining coin was due in June, providing the digital alliance between Kirch and Bertelsmann got the greenlight from Brussels.

The second payment now has to be made by the end of December.

Canal Plus execs have been insisting that despite Kirch’s digital problems in Germany, the Premiere deal is totally secure.

Financial analysts in Paris have been nervous over whether Canal Plus’ agreement with Kirch was watertight, particularly as the French group’s results are feeling the strain of considerable investment in new technology, film and sports rights, absorbing NetHold and developing digital services in France, Italy and Spain.

Defending the strategy

Speaking to the annual shareholders meeting in Paris on Thursday, group chairman Pierre Lescure defended the strategy, arguing that to remain the leading European pay and digital TV operator, Canal Plus needs to take a long-term investment approach.

Canal Plus head of finance Laurent Perpere predicted that 1998 losses will be in the region of $100 million, with a considerable improvement in 1999 and profits for the year 2000 expected to bounce back to some $166 million.