PARIS — In the latest blow to the European pay TV market, Canal Plus said Wednesday that it is calling off the merger of its Italian paybox Telepiu with News Corp.-owned rival Stream.
Announcement throws into doubt the future of Italian pay TV and puts Canal Plus parent Vivendi Universal back in the hot seat with News Corp. topper Rupert Murdoch, who has said he might sue if Viv U backed out of the merger.
A combination of Viv U’s massive $15 billion debt and tough conditions slapped on the deal by Italo antitrust authorities led the French conglom to scuttle a merger that was touted as the only hope for both money-losing services.
‘Not a valid reason’
“The fact that Vivendi has significant financial constraints at present is not a valid reason for not complying with the merger agreement,” said a News Corp. spokesman in New York.
But Vivendi may be within its rights.
In a joint statement, Canal and Viv U said: “They regret (the Italian antitrust authorities have) imposed conditions going beyond the undertakings already made” by Canal. “Looking at the pay TV market in Europe today, it is not reasonable to accept any further conditions,” the companies said, referring to the recent meltdowns of Kirch Group’s Premiere and the U.K.’s ITV Digital.
Most think the demise of the proposed merger means almost-certain death for Stream, which will probably file for bankruptcy. Murdoch said during a conference call Tuesday that Stream could continue as an aggressive competitor to Telepiu with financing from News Corp. and co-owner Telecom Italia.
Separately, Viv U said Wednesday that it has promoted Jay Itzkowitz to the post of senior VP, mergers and acquisitions. He will focus initially on debt reduction and restructuring. Viv U also named chief operating officer Eric Licoys VP of Canal Plus’ supervisory board.
Shares of Viv U and News Corp. continued their upward trajectory Wednesday. The French group rose 4.55% to $30.08 as investors applauded its decision to sell its stake in BSkyB (and to scrap the Telepiu-Stream merger). News Corp. shares surged nearly 7% to $30.43 after a strong quarterly earnings report Tuesday.
(Jill Goldsmith in New York contributed to this report.)