Murdoch Scores In Italy - 10/12/02

Italy is set to have an equivalent of BSkyB in pay television after Rupert Murdoch took over Telepiu, the Italian satellite television group. The supposed 1.5 million subscribers will be folded into News Corp's existing Stream-pay TV joint venture with Telecom Italia which has 700,000 customers. Sky Italia, as it will be known, hopes to have 3.54m customers by 2006.

Telepiu was acquired by debt-burdened French parent Vivendi for just €470m in cash, plus an assumption of €423m in debt. It is a good bargain given that Telepiu recently paid €370m for football rights. Vivendi had first hoped to receive €1.5bn and the final deal is a bitter blow for the French company, but an excellent one for Murdoch. He commented, 'The Italian market is one of the last untapped frontiers for pay-TV', football being a key attraction to capture that market as has been the case in Britain. Given the production and distribution strengths of NewsCorp, and the cost savings they should be able to secure, Italian analysts agree that NewsCorp should make money.

The only problem is piracy. About five million households have dishes, but only two million actually pay for the service they receive. Murdoch has vowed to eradicate such piracy by inroducing new access technology pioneered by NDS, the satellite encryption company 79 per cent owned by NewsCorp. He commented, 'Piracy has been a function of two factors: first, Telpiu's old smart card was rubbish, and pirated cards were easily available.'

EU to Probe Murdoch Bid

Brussels regulators have opened a four month inquiry into the proposed deal. It may be that NewsCorp will have to make more concessions to secure the deal, but the company's senior executives were reported to be relaxed about the probe. They have already offered a number of concessions to Brussels, including the sale of two terrestial channels. NewsCorp have also offered to give the eighteen Serie A clubs the chance to opt out of their two year contracts at the end of the first year, although the absence of a viable alternative makes this unlikely.

The European Commission said that the takeover would create a 'near monopoly' in the Italian pay-TV market. NewsCorp argues that pay-TV has only an eight per cent penetration in Italy compared with 38 per cent in the UK. There are also eight free-to-air channels in Italy.