News welcomes Telepiu to family
Purchase price from Viv U: $887 mil
|
This is a key disposal in the French media giant's planned $11.7 billion rummage sale. It's a triumph for Rupert Murdoch, who was clearly thrilled by the monopoly potential of merging Telepiu with Stream, the rival pay TV platform he owns with Telecom Italia. The new company will be called Sky Italia.
"We seek to turn this asset into one of the most profitable television platforms this company has ever created," Murdoch told investors at a Goldman Sachs media conference in New York, calling Italy a "wealthy, untapped market."
Eyeing DirecTV
Separately, Murdoch said he'd "look at" DirecTV if asked to, but "would look very carefully." Evidence is mounting that regulators won't approve satcaster EchoStar's proposed purchase of DirecTV parent Hughes Electronics.
"As far as we're concerned, we closed the book in October of last year. If we are asked to return, we will. Our inclination is to hold on to our cash and improve our balance sheet," Murdoch said.
"It sounds like the start of negotiations," said an exec from another showbiz conglom at the conference.
In Italy, Telepiu and Stream both lose money. But Murdoch said that's because the market was fragmented and piracy is rampant. The merger solves the first issue, and he's planning to solve the second with tamper-proof smart cards and by leaning on retailers not to sell digital boxes without subscription commitments.
News Corp., which owns Fox and British Sky Broadcasting, paid significantly less than Telepiu's original pricetag of $1.48 billion.
Murdoch has gloated that News Corp. got Telepiu "for damn near nothing."
Sky Italia has about 2.2 million subscribers, and Murdoch hopes to push that above 3.5 million by 2006. He thinks Italians will pile on for the united company's 40-plus basic channels, 18 soccer teams and Hollywood movies. Sky will have the rights to pics from all the major studios, although Murdoch said he plans to renegotiate -- and slash -- fees.
He said Italy, the third largest economy in continental Europe, has 52 million TV households and only six real broadcast channels. Pay TV penetration is only 9%, and there's no competition from cable.
Telepiu has already shelled out $358 million for soccer rights for the next two seasons, which will be handed over to News Corp. in the deal.
Viv U subsid Canal Plus bought Telepiu in 1997 in a bid to create a Europe-wide network. Telepiu, which has never made a profit, accounted for the lion's share of Canal Plus' $358 million loss last year.
News Corp. will be forced by Italian regulators to sell the paybox's digital terrestrial licenses, worth $88 million-$98 million. Viv U will pay all outstanding accounts right up to the closing of the deal. Deal may need approval by European antitrust authorities.
Tom Mockridge, the new CEO of Sky Italia, said at the conference he expects the deal to close in December. He called Italians "a friendly and welcoming people who love their television."
Viv U boosts UGC stake
In related news, Viv U is planning to up its 39% stake in Gallic cinema group UGC to 55% after French bank BNP Paribas exercised a put option forcing the debt-laden conglom to buy the extra 16%, according to French press reports.
The acquisition, valued at around $49 million, makes Viv U the majority shareholder of UGC, but the Verrichia family retains management control of the exhib-distrib. UGC has right of first refusal on the stake if Viv U decides to sell it.
UGC has theaters in six European countries, a French distribution arm owned jointly with 20th Century Fox, a distribution venture in the U.K. and production activities through UGC Intl.
