Gaul’s France Telecom-Orange has merged its pay TV bouquet Orange Cinema Series with rival Canal Plus’ TPS Star, creating a 50/50 joint venture, the companies announced Wednesday.

The partners will merge blockbuster film channel Orange Cine Max with Canal Plus’ general entertainment channel TPS Star to create a new premium pay TV channel, Orange Cine Star. It will be distributed by Orange networks and CanalSat and available to any telco operator in France.

The deal ends friction between pay TV giant Canal Plus and Orange after the latter made waves at Mip TV in March 2008 announcing exclusive multiyear deals with WBITD, HBO and a clutch of Gallic players for its premium pay TV service. Deals with MGM, Lionsgate and the BBC followed.

Costing around $65 million a year in film and series rights, OCS has 494,000 clients.

France Telecom CEO Stephane Richard has been looking for a buyer for premium pay TV services, Orange Sports and Orange Cinema Series, since July.

“His decision was that France Telecom should focus on what it knows about, not necessarily content,” said Screen Digest’s Tim Westcott.

Partnering with Canal Plus on Orange Cine Star, Orange also reduced its exposure to losses, he added.

The pact re-confirms Canal Plus’ dominance of pay TV in Gaul. “Canal Plus has once more met with a challenge from a potential competitor and seen it off,” said Westcott.

The merger with TPS nipped a satellite challenge in the bud, and digital terrestrial TV in France hasn’t produced a pay TV competitor to Canal Plus, he added.

“This natural partnership with France’s leader in the ADSL market fulfills our multi-platform strategy and makes our products available over all broadcast networks,” said Bertrand Meheut, Canal Plus Group chairman.