Pay TV monopoly in Europe's third largest economy

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    I'm surprised NCP hasn't generated HC comment given some of the news of late, how well it's been holding up in the U.S. in recent days and it being the best performer in the top 20 again. Are we "all" still hanging out for a disaster or something?

    For instance "Sky Italia will be the only pay TV service in the third largest economy in continental Europe, a market with no cable television," Mr Murdoch said.

    http://www.abc.gov.au/news/justin/nat/newsnat-2oct2002-78.htm

    Posted: Wed, 2 Oct 2002 11:26 AEST

    Murdoch plans to buy Telepiu from Vivendi
    News Corp chief Rupert Murdoch has announced the group will buy Italian pay television channel Telepiu from Vivendi Universal for about $1.6 billion in cash and debt.

    Mr Murdoch told a Goldman Sachs media industry conference News Corp will pay $860 million in cash and assume $760 million in debt.

    Telepiu is to be merged with News Corp's existing Italian channel Stream to create a new company, Sky Italia.

    "Sky Italia will be the only pay TV service in the third largest economy in continental Europe, a market with no cable television," Mr Murdoch said.

    "We will achieve immediate subscriber growth simply by eliminating piracy, offering programming of a variety and quality that Italian viewers never experienced on a single platform," he added.

    "We have done it before. Investment is minimal."

    Mr Murdoch says he expects Sky Italia to break even by 2004 and to be profitable by 2005.

    Surprise announcement

    Last week, Vivendi chairman and chief executive Jean-Rene Fourtou surprised News Corp by announcing that a deal had been agreed while negotiations were still continuing.

    Vivendi, a troubled US-French media group, is trying to sell assets to reduce debt.

    Earlier this summer, News Corp offered Vivendi about $2.7 billion for Telepiu but as it became clear Vivendi was in need of cash, Mr Murdoch persuaded Vivendi to accept a lower price.

    Analysts at Merrill Lynch have welcomed the deal.

    In a statement, senior analysts Jessica Cohen and Andrew Slabin said: "We believe that News Corp has sufficient capacity to fund this transaction with nearly $6.6 billion of cash on hand at the end of the fiscal year 2002 and $1.8 billion of free cash flow in fiscal 2003."

    The starting point for combined subscribers was 1.9 million and the company expects to add roughly 580,000 subscribers in fiscal 2004, the statement said.

    "While this transaction is expected to require a near-term cash outflow of roughly $US1 billion (including News Corp's $US550 million dollar investment), we believe in the long-term strategic value of being the sole pay-TV operator in Italy."

    Disclaimer: I don't own any NCP shares at the moment.
 
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