Italian pay-TV merger in trouble

Italy’s Antitrust Authority (AA) has postponed its decision on the planned merger of the country’s two loss-making pay-TV platforms, Tele+ and Stream. The formal decision had been expected on Nov. 13 but will instead be announced “by mid-December,” according to a spokeswoman for the watchdog body. The news is not expected to be positive.

The merger would have created a single Italian pay-TV operator which would be 75% controlled by French pay-TV giant Canal Plus, which owns Tele+, and 25% controlled by Rupert Murdoch’s News Corp., which currently holds 50% of Stream and had agreed to buy the other half from partner Telecom Italia if the merger received the green light.

The antitrust body is expected to make a final decision once it has received the views of the Communications Authority, which are themselves not binding. From the very beginning the AA seemed poised to quash the planned merger, arguing that co-ownership of the merged platform by two of the world’s largest media companies would cancel any competition in Italy and also shut out potential new entrants. Negotiations during the past few weeks between the AA and the operators have made some progress. It is understood that Tele+ and Stream have supplied ample guarantees covering the opening of the single pay-TV platform to other Italian media groups currently not active in the pay-TV sector. The two operators also agreed to limit the duration of the football contracts for a period under three years. Finally, Tele+ expressed its willingness to exit the digital terrestrial television sector by giving back all of its DTT frequencies.

However, these concessions do not seem to have been enough to convince AA President Giuseppe Tesauro of the feasibility of the operation. According to the AA’s estimates, which differ from figures provided by Tele+ and Stream, the pay-TV market is expected to develop during the next five years at a rate of between 15-20 per cent, thus reaching four million subscribers by 2005. Also, the AA is not convinced that Stream is threatened with “concrete or immediate” liquidation and that, in any case, Stream’s market and subscriber base could be bought by other outfits. Uneasiness is also growing in Italian political circles that a local alliance between Canal Plus and News Corp. would create a major stumbling block for other prospective players if and when the country’s pay-TV market begins to develop.

Communication Minister Maurizio Gasparri has expressed his hope that an eventual negative decision will not have serious consequences for the underdeveloped pay-TV sector. Tele+ President Emmanuel Gout has said that the merger with Stream is necessary, otherwise, the “market will not develop”. Gout claims that “a single pay-TV offer is better for football than the single decoder” and that if the merger should go ahead “there will be better conditions for consumers”. Meanwhile, Italy’s film community is anxious over fears that a merger could affect its financial resources. More than sixty producers, directors and writers launched an appeal to the AA demanding that the trade organisation API be consulted before the watchdog reaches a decision. “The future of Italian pay-TV and of Italian film production are linked. Whatever the upcoming pay-TV scenario is, an adequate level of investment in Italian independent production must be ensured,” they said in an open letter. Tele+, in particular, is one of the key investors in the local movie industry, investing more than 46 million euros each year. Also expressing themselves against the merger are the Sole 24 Ore Group, Sitcom (producer of the Marco Polo and Alice channels), Hdp Net and the Espresso Group, which are preoccupied that the birth of a single pay-TV entity could close the doors of this sector to potential new broadcasters.

Telecom Italia said on Nov. 7 it would want to close down Stream if the regulators block a planned merger, but expressed hopes that regulatory problems can be overcome. For his part, News Corp.’s Rupert Murdoch said that he expected Telecom Italia would return to the Stream partnership if the merger were blocked. He also made clear that News Corp. would not pull out of Stream altogether, but would rather look for another Italian partner. Stream, which News Corp. bought last year after it was originally launched as a cable service by Telecom Italia, has nearly 800,000 subscribers while, Tele+ has an estimated 1.5 million digital subscribers.

–Branislav Pekic