News

Italian Single-DTH-Platform Plan Threatened

5/10/1998 8:00 PM Eastern

Milan, Italy -- The possibility of an agreement to create a
single direct-to-home television platform in Italy is looking less likely, as new
developments are pushing the coalition between public broadcaster RAI, Telecom Italia and
Cecchi Gori's Telemontecarlo group toward establishing a second platform to compete
with the existing Telepiu platform.

Italy's minister of communications Antonio Maccanico
and Mediaset president Fedele Confalonieri still maintain that a single platform is
desirable. However, Maccanico has granted a renewable six-month experimental license to
TI/RAI-owned cable operation Stream to launch a digital DTH service. Tests began May 1
with a hybrid channel called Cult TV, which is stocked with programming from Stream's
cable bouquet. Stream's cable service has 40,000 subscribers.

The move is seen as a demonstration of TI's and
RAI's will to push ahead with a second platform, possibly in partnership with French
DTH player Television Par Satellite. However, many believe that the move by TI and RAI was
merely intended to create leverage to bring France's Canal Plus, which owns 90
percent of Telepiu, back to the negotiating table with terms on a single platform that TI
and RAI find more favorable.

Although Canal Plus agreed to relinquish majority control
(70 percent) of the digital platform to the TI/RAI/Cecchi Gori consortium in October, the
talks stalled over the reported 1.82 trillion lire ($US1 billion) price tag that Canal
Plus placed on the shares, based on the value that it brings by contributing the Telepiu
subscribers.

Meanwhile, Canal Plus has discussed the possibility of
floating 20 percent of Telepiu on the stock market. The move is seen as an indication that
Canal Plus is preparing an alternative way of raising much-needed capital for Telepiu if
the negotiations to form a single digital platform for Italy finally collapse.

Despite Mediaset's existing partnership with Canal
Plus through Mediaset's 10 percent stake in Telepiu, insiders said Mediaset itself is
keeping its options open. Confalonieri is said to be considering the possibility of
switching allegiance to an all-Italian consortium if RAI and TI finally decide to go ahead
with their own platform.

The possibility of digital terrestrial television is also
being examined by Mediaset, which is keen to exploit the multichannel possibilities that
digital technology represents in order to overcome the imminent loss of its third
terrestrial-analog channel, Rete 4. Last year's new media law obliged Mediaset to
transfer Rete 4 from terrestrial to satellite distribution by 1999.

According to Carlo Freccero, head of RAI's second
terrestrial-analog channel, Raidue, the development of digital cable and satellite
platforms will be overshadowed by DTT. "Despite the apparent simplicity of satellite
distribution, the future for TV in Italy lies with terrestrial delivery for a multichannel
digital system, similar to the British consortium being supported by the BBC [British
Broadcasting Corp.]," Freccero recently commented.

Cecchi Gori's Telemontecarlo has committed to abiding
by whatever decision RAI and TI finally make, whether they launch a second digital
platform or partner with Canal Plus. Cecchi Gori recently announced that it is preparing
to launch a bouquet of up to 10 digital pay TV channels with an as-yet-unnamed U.S.
partner, which is thought to be Warner Bros. International Television.

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