French kiss for paybox
Canal Plus seals pay TV merger deal
Adcasters TF1 and M6, which own TPS, will hold 9.9% and 5.1%, respectively, of the new group under the terms of a draft agreement finalized last week. After three years the two broadcasters have the option of selling their total 15% for e1.3 billion ($1.56 billion), which values the new group at $9 billion.
New entity, comparable in size to Britain's BSkyB, will boast 7 million- 9 million subscribers; exact numbers aren't known because Canal Plus does not divulge how many of the 5 million subscribers to its flagship terrestrial channel are double subs (also among the 3 million that subscribe to its digital platform Canalsat). TPS' platform boasts around 1.6 million subscribers.
Regardless of the numbers, the emergence of a single pay TV player in France is a major shift in the only European market left where two companies were still battling it out for movies and sport rights.
Deal is viewed as a win-win situation for all parties involved, as reflected in a hike this week in the share prices of all of them. Vivendi Universal comes away the biggest victor, however, seemingly vindicated in its more aggressive policy of grabbing broadcasting rights whatever the cost. Last year it agreed to pay an astronomical $760 million annually for rights to French first division football. The move had the desired effect of bolstering subs, which will be up across all its services by 200,000 this year, while TPS' stagnated, effectively killing off any hopes for the operator.
The merger will be realized in two stages. First Viv U will buy 18% of TPS for a cash advance of $180 million. Once the deal has received the greenlight from antitrust authorities -- a process not without complications but expected to go ahead successfully -- the money will be repaid and the shareholders will take up their pre-agreed stakes in the new group.
Putting forth their justification for the merger in Friday's statement, France's new pay TV partners said their market was being undercut by the rapid development of digital technology and its takeup among consumers, the increasing number of free services via DTT and ADSL and the new ambitions of wealthy telcos and Internet service providers with their "disproportionately large financial resources."
There have been several sports rights deals involving telcos in Gaul, and French TV execs believe it is only the start of a bigger push into the TV sector.
Because of these factors, France's current pay situation "now appears to be inappropriate, has resulted in a fragmented and incomplete range of products to the detriment of consumers," Friday's statement read. The only missing piece of the French pay TV puzzle is Lagardere.
Despite 11th hour talks, announcement came without a resolution to lengthy negotiations with the group that owns 34% of Canalsat, a stake it is seeking to swap for a stake in Canal Plus Group.
Viv U said its investment in the new group could change depending on the outcome of those discussions but that it would, directly or indirectly, retain the majority of the share capital and control of the new group.
