In the latest blow to the Euro pay TV market, France’s Canal Plus has called off the merger of its Italian paybox Telepiu with News Corp.-owned rival Stream.
The May 15 announcement throws into doubt the future of Italian pay TV and puts Canal Plus parent Vivendi Universal in hot water with News Corp. topper Rupert Murdoch.
A combination of Viv U’s massive $15 billion debt and tough conditions slapped on the merger by Italian antitrust authorities forced the group to back out from the deal that has been touted as the only hope for both loss-making payboxes.
In a joint statement Canal Plus and Viv U said “they regret that the antitrust authority has imposed conditions going beyond the undertakings already made by Canal Plus Group.
“Looking at the pay television market in Europe today, (we) consider that it is not reasonable to accept any further conditions,” it added, referring to the recent meltdown of Kirch Group’s Premiere paybox in Germany, ITV Digital in the U.K and Quiero in Spain.
Canal Plus intends to “focus on improving Telepiu’s operational performance, including the continuation of its cost-reduction plan.”
The demise of the proposed merger means almost certain death for Stream, which will probably file for bankruptcy.
A day earlier, an irate Murdoch warned: “If Vivendi doesn’t go through with the deal, we’ll sue. Stream will stay in business as a very active competitor.”
Still, Viv U has the right to pull out of the deal, and it has already “started discussions with News Corp. to draw conclusions from this new situation.”
The terms of the long-mulled merger, agreed to in February, saw Telecom Italia selling its 50% stake in Stream to News Corp. and Viv U, which would simultaneously buy 100% of Stream via Telepiu.
Italian officials issued an 80-page-thick dossier May 13 outlining the 10 conditions it would impose on the Telepiu-Stream merger, including a particularly tough stipulation regarding soccer rights.
The provision called for restrictions on the amount of time the company could hold the rights, agreeing to less than Viv U had asked for. Both Stream and Telepiu have nearly bankrupted themselves over their rivalry for the prized rights.
The antitrust authority hoped its conditions would keep the market open to new operators and silence criticism at the creation of a pay TV monopoly controlled by a non-Italian company.
In the last few years, several attempts to merge the two operators have failed as the two companies continued to bleed red ink.
Stream, with almost 700,000 subscribers, is estimated to have lost $200 million last year, while Telepiu, with twice as many subs, is said to have lost $300 million.
“The problem now is to understand what Stream shareholders will do,” said Maurizio Gasparri, Italian minister for communications. “Let’s hope for the best. I take note of Vivendi’s decision, but I believe the antitrust body operated to guarantee transparency and competition on the market, not to kill companies.”